Silver Rises to 30-Year High and Slips Into Backwardation

Gold did virtually nothing on Friday. The New York low [$1,380.90 spot] came shortly after Comex trading began...and the high of the day [$1,393.20 spot] occurred during the lunch hour. Then it sold off a few dollars into the close. Nothing to see here.

The silver price was almost as quiet as a church mouse all through Far East and London trading...and right up until the London p.m. gold fix at 3:00 p.m. GMT...or 10:00 a.m. Eastern. Then, away it went to the upside. In the space of three hours, silver was up a bit more than a dollar, before getting sold off into the close of Comex trading at 1:30 p.m. in New York. When electronic trading began, silver continued to inch higher right up until the close at 5:15 p.m. Eastern time.

Silver's New York low of $31.67 spot came at 8:30 a.m. sharp...and the high tick [$32.92 spot] occurred a few minutes before 1:00 p.m. Silver is now in backwardation in all months and years...and I'll have more on that in 'The Wrap'.

Looking at the Kitco chart below, I get the distinct impression that the silver price would have gone higher had it been allowed to rise freely...as I suspect that there was some intervention in the price in the latter half of the New York trading session. Maybe I'm just imagining things, but I don't think so.

The dollar opened around 78.00 cents...rose to 78.20 cents around lunchtime in London [7:00 a.m. in New York]...and then fell out of bed to the tune of 60 basis points...and closed at 77.60.

The gold stocks were in positive territory right from the opening bell yesterday morning...and rose slowly until 1:15 p.m. Eastern time..before rolling over and giving up a percentage point of those gains by 2:30 p.m...before trading sideways into the close. Normally, the gold stocks follow the gold price like a shadow...and I found the 1:15 p.m. sell-off rather strange considering the fact that the tops were in for both metals about half an hour before that.

Here's the 5-day HUI for the week that was. It's a very happy looking chart, but the gains in the silver shares dwarfed those of their golden cousins...which is why my precious metals portfolio is 75/25 silver/gold.

It was a rather quiet delivery report from the CME yesterday...as only 3 gold and 13 silver contracts were posted for delivery on Wednesday.

The GLD ETF just can't seem to catch a break at all. In the face of rising prices...and for the second time this week...it has recorded a withdrawal. This time it was 29,267 troy ounces. But it was an entirely different kettle of fish over at the SLV ETF, as they recorded a huge increase of 2,587,783 troy ounces. Based on the record gains in the silver price this past week, it's a pretty safe bet that the SLV is still owed a mega amount of silver...and Blackrock has probably been forced to short the shares in lieu of the physical metal itself.

For the fifth day running, the U.S. Mint has had a sales report. Yesterday they sold another 15,000 ounces of gold eagles, along with a paltry 50,000 silver eagles. Month-to-date...gold eagles sales are now up to 75,000 ounces...and silver eagle sales are at 1,822,500.

Over at the Comex-approved depositories on Thursday, they reported receiving 84,255 ounces of silver...and shipping 262,603 ounces out the door. The net change on the day was a drop of 178,348 troy ounces.

The Commitment of Traders report [for positions held at the close of trading on Tuesday, February 15th] showed a deterioration in open interest in both silver and gold.

In silver, the bullion banks increased their short positions by 3,930 contracts, or 19.65 million ounces. The net Commercial short position in silver now sits at 275.2 million ounces. Of that amount, the '4 or less' traders are short 209.6 million ounces...and the '8 or less' bullion banks are short 270.7 million ounces of silver. The link to the full-colour COT report is here...and it's definitely worth looking at.

In gold, the bullion banks increased their short positions by a further 8,715 contracts...or 871,500 ounces. The Commercial net short position in gold, as of the Tuesday cut-off, was 21.9 million ounces. The '4 or less' bullion banks were short 16.4 million ounces...and the '8 or less' bullion banks were short 22.2 million ounces of gold. The link to the full-colour gold COT report is here...and it's also worth a look.

Nick Laird over at sharelynx.com was kind enough to update Ted Butler's "Days to Cover Short Positions" graph for all commodities traded on the Comex. As is always the case, the silver and gold short positions are the stand-out features on this chart...as they've been for decades.

For the week that was, gold was up about $33 from its Monday low to its Friday close...which is 2.4%. But silver was on a tear...and was up $2.72 for the week...about 9.1%...which is a staggering amount. Needless to say, the gold/silver ratio is now broken through a low that has existed for 30+ years...and I thank Washington state reader S.A. for providing this 30-year Gold/Silver Ratio graph. It's another chart that needs no embellishment from me. The gold/silver ratio closed at 42.67 on Friday...a data point that's not on this graph.

¤ Critical Reads

Foreclosure Volume SOARS 50% In California And Arizona, As The Moratorium Ends

Being the weekend and all...I have a lot of stories today...a couple of which I've been saving all week.

Today's first story is courtesy of reader Steve Pierce...and is posted over at the businessinsider.com website. Analysts have been warning for months that the decline in foreclosures was due to the robo-signing moratorium, and did not signify an improving housing market. Well, now that shoe has dropped...and next month things could get even worse. The story is only a handful of paragraphs...but definitely worth your time. here

View full GSD edition

G20 Paris: Bernanke defends easy money policy and calls for currency reform

This next item is from The Telegraph and is courtesy of reader Roy Stephens. US Federal Reserve Chairman Ben Bernanke defended his country's easy money policy ahead of the G20 leaders meeting in Paris, and joined Bank of England Governor Mervyn King in calling for currency reform. Judging by the contents of this article, this G20 meeting is already doomed to failure. here

View full GSD edition

What Is Wrong With The U.S. Economy? Here Are 10 Economic Charts That Will Blow Your Mind

Next is this piece that I've been saving for the weekend. It's a rather longish article that's posted over at theeconomiccollapseblog.com website...and was sent to me by reader Tom Morse. In ten charts, the essay pretty much lays out the economic collapse that faces the U.S. in the not-to-distant future. In my opinion, it's certainly worth spending a few minutes on. here

View full GSD edition

Ivory Coast Banks, Stock Exchange Close Amid Bank Run

Yesterday I posted a story about a South Korean bank that had collapsed...and how depositors were lined up at the door. Here's a similar story about banks over in the Ivory Coast. Their financial system is grinding to a halt with banks closing and the stock market suspended, sparking a run on the lenders left open as the West African nation’s political crisis drags on. It's a Bloomberg piece that's courtesy of reader Raymond Zuiderwijk...and it's worth the read. here

View full GSD edition

Saudi Arabia Risks Shiite Unrest in Wake of Bahrain

Here's a Bloomberg story courtesy of Washington State reader S.A. Violent unrest in Bahrain provoked by discontent among the majority-Shiite Muslim population risks spilling over to their co-religionists in neighboring Saudi Arabia, which holds one-fifth of the world’s oil, analysts say. Unrest in Bahrain, which is linked to Saudi Arabia by a 26-kilometer (16-mile) causeway and whose capital, Manama, is only a four-hour-drive from its Saudi counterpart, Riyadh, has in the past spread across the border. The story is worth running through. here

View full GSD edition

The World from Berlin: 'Witnessing Gadhafi's Overthrow Would Be a Special Pleasure'

Roy Stephens brings us this next story that's posted over at the German website spiegel.de. The wave of rebellion in the Arab world keeps spreading, but brutal crackdowns in Libya and Bahrain show that pro-democracy demonstrators are by no means assured of success. German commentators argue that Moammar Gadhafi will be hard to topple and call on the EU to help prevent more violence. These in-depth essays from European sources are always worth the read, in my opinion...and this one is no different. here

View full GSD edition

Comex gold, silver margins raised 50%; and Washington state might fingerprint gold buyers

Today's first precious metals-related story is a three-for-one GATA release that contains information about the raising of margin requirements in gold and silver...and a proposed law in Washington state that might require gold buyers to be fingerprinted for anyone who purchases more than a tenth of an ounce of gold. I would suggest that you spend some time on this. here

View full GSD edition

Financial Times notices that gold is winning, and partly why

Here's another GATA release for you. It's a story from Britain's Financial Times yesterday...and their headline reads "Gold Will Keep Its Shine This Year". The story starts off with the following paragraph..."Unbelievable. Explosive. Insatiable. These are some of the words bankers are using to describe the gold market. That may come as a surprise, as the gold price has had an uncharacteristically quiet start to the year, for the most part trading either side of $1,350 an ounce." here

View full GSD edition

Rick Rule - Probably Black Swan Event Equals Gold Explosion

Rick Rule of Global Resource tells King World News that he has to be bullish on silver in the short term as well as the long term because of the "extraordinary imbalance of supply and demand." Rule adds that a "black swan" event seems ever more likely to send gold soaring as well. Rule, one of the last dinosaurs that never believed that the prices of silver and gold were managed, is certainly singing a different tune now that he works with Eric Sprott all the time. The blog is worth the read. here

View full GSD edition

Silver At Escape Velocity, As Another ECB Intervention Desperately Needed

Washington state reader S.A. provides this zerohedge.com piece where the proprietor gloats over the problems now facing JPMorgan et al...and the big margin calls in silver that went out at the close of trading yesterday. The graph is worth the trip...and T.D. also mentions the woes confronted by the latest ECB bond monetization. It's a very short read. here

View full GSD edition

Silver Rises to 30-Year High as Mints Start to Ration Coins

Reader S.A. also sent me the following story that ended up as a GATA release when I sent it to Chris Powell yesterday. It's another Financial Times story...this one from the Thursday edition. This dynamite quote from David Madge, head of bullion sales at the Royal Canadian Mint tells all..."We have sold everything we can produce in silver and have demand for at least twice that volume." This is a must read story from one end to the other. I'm linking the GATA release on this, as all FT stories require a sign-up or subscription of some kind. The GATA headline reads "Plenty of silver, Jeffrey? Tell it to the mints" here

View full GSD edition

Interview With Jean-Marie Eveillard: King World News

Jean-Marie Eveillard: Senior Adviser, Portfolio Management for First Eagle Funds -Jean-Marie has 40 years of experience in the financial industry and oversees $35 billion. Eric King says that they spend a lot of their interview time discussing the precious metals. I must admit that I haven't had the time to listen to it, as I didn't receive it until the wee hours of this morning. here

View full GSD edition

Gold: the ultimate inflation hedge

Reader Roy Stephens dug up a gold-related story over at The Telegraph which was posted at one minute past midnight today...so it's hot off the press, so to speak. This is another piece that damns gold with faint praise...and urges investors to be cautious. Of course, I've been hearing that b.s. since gold broke through $300 the ounce about ten years ago. The so-called expert consultants that the writer interviews, sound like they couldn't find their behinds with both hands and a flashlight...so be forewarned. here

View full GSD edition

G-10 minutes from 1997 show central bankers conspiring about gold

Western government and central bank officials discussed coordinating their gold market policies at a private meeting of the G-10 Gold and Foreign Exchange Committee in April 1997, according to minutes of the meeting released to GATA today by the Federal Reserve Board upon the order of a federal court. The minutes also quote a U.S. delegate as warning that a rising gold price would increase the U.S. government's debt burden. This is a must read. here

View full GSD edition

'Fisher' at G-10 gold meeting was likely NY Fed's market rigger Peter Fisher

GATA's Chris Powell was certainly burning the midnight oil last night...as the following GATA release arrived in my in-box at 4:12 a.m. Eastern this morning. A well-informed friend notes that the "Fisher" quoted in the minutes of the April 1997 meeting of the G-10 Gold and Foreign Exchange Committee, dispatched to you yesterday, was almost certainly Peter R. Fisher, then head of open market operations and foreign exchange trading for the Federal Reserve Bank of New York, not Richard W. Fisher, lately president of the Federal Reserve Bank of Dallas, as first suspected. This is worth running through as well. here

View full GSD edition

Why Isn't Wall Street in Jail?

My last offering of the day, is also your big read of the day...for which I thank reader U.D...who was the first one through the door with this piece.

Matt Taibbi is at in once again...this time in the March issue of Rolling Stone magazine. In his usual 'X' rated pithy prose, Matt tees up the Wall Street crooks and drives them down the fairway. Taibbi says that the financial crooks brought down the world's economy...but the feds are doing more to protect them than to prosecute them.

Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer..."Everything's f**ked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that." I suggest that you top up your coffee and get started. here

View full GSD edition

We have sold everything we can produce in silver and have demand for at least twice that volume.- David Madge, head of bullion sales at the Royal Canadian Mint

The gold price action yesterday...and for the entire week...has been nothing worth writing home about. Volume in gold, net of all spreads, was around 105,000 contracts on Friday...and the preliminary open interest number is depressing to look at...and I'm surprised it's so large considering the poor price action yesterday. Maybe it was spreads...but we won't know the final number until late Tuesday morning.

But silver was the star yesterday...as it has been for most of the week. Volume was decent...and the preliminary open interest number was surprisingly low. Maybe Monday will show a decline in open interest. That would be a shocker, as it would mean that yesterday's price action was short covering.

Final open interest figures for Thursday's trading day showed that gold o.i. rose a smallish 2,369 contracts...and silver's open interest was up another 2,349 contracts. That silver number is quite steep, but considering the big move in the silver price on Thursday, it could have been worse. All the big moves in silver this week have come after the cut-off for yesterday's COT report...and this big two-day up-move in silver won't show up until next Friday's report.

On top of Friday's preliminary open interest surprise, was another. The March open interest is still astronomically high at 53,090 contracts...with no sign whatsoever of any kind of liquidation. Time is running short to roll out of this contract...and my mind just won't wrap itself around the possibility [at least at the moment] that a huge chunk of these contracts might stand for delivery on February 28th. Stay tuned.

However, the really big news was that silver, which was heading into backwardation in the wee hours of Friday morning as I posted my column for day, finally made it there. The Friday settlement price posted on the CME's website showed that the March contract closed at $32.296...and the May contract closed at $32.285...a backwardation of 1.1 cents. And the backwardation now extends all the way out to the very thinly-traded December 2015 contract which is priced at $31.568.

Here's the 'Settlements' page from the CME's Silver Futures website, so you can see this for yourself. The numbers quoted above are from the 'Settle' column. You should also note the trading volumes in some of those distant months. Pretty tiny, aren't they?

At the moment, the backwardation is not very pronounced...but it was wider during the trading day on Friday. If the backwardation gets really large in terms of price difference between months...then look out!

Here's the 6-month silver chart. We are now really into overbought territory. Normally I'd be looking for a place to hide under these circumstances...but these are not normal times in the silver market, so this chart may mean nothing. I'm certainly not heading for exits based on what this chart says. And, as you can tell from looking at the RSI, the silver market can stay 'overbought' for long periods of time...and I would expect that may prove to be the case in this instance.

There's still time [but not too much time, in my humble opinion] to either readjust your portfolio...or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. A subscription to the International Speculator also includes a free subscription to BIG GOLD as well. And don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

Monday is President's Day in the U.S.A...but I may have a report on Tuesday morning regardless...and that depends entirely on how much 'action' there is in the gold and silver markets on Monday on the rest of Planet Earth. Next week's activity in the silver market may go down in the history books...and the record books.

Enjoy the rest of your weekend